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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 39 OF 2022
BETWEEN:
NICKSON SAMBLAP & 2558 OTHERS
Plaintiffs
AND:
GUEST FUND LIMITED
Defendant
Waigani: Tamade AJ
2022: 22nd July; 25th November
CONTRACTS – agreement between various plaintiffs investing money in the defendant companies account – no payment made after maturity period – owner of defendant company fled overseas – all investments wasted – no formal agreement – advertisement on FaceBook – offer made – acceptance and performance
COMPANY LAW – company is a separate legal entity – lifting the corporate veil – owner of defendant company held liable
Cases Cited
Bennet v Wuagima Yakari Investments Ltd [2022] PGNC 60; N9451
Naki v AGC (Pacific) Ltd [2005] PGNC 163; N2782
State v Wyborn [2004] PGNC 3; N2847
Niugini Building Supplies Ltd v National Housing Estate Ltd [2020] PGSC 90; SC1985
Odata Ltd v Ambusa Copra Oil Mill Ltd [2001] PGNC 110; N2106
Counsel:
Mr George Akia, for the Plaintiffs
25th November, 2022
1. TAMADE, AJ: On 22 July 2022, Mr Akia representing the Plaintiffs made submissions before this Court on the substantive hearing of this matter. On hearing submissions by Mr Akia, this Court reserved a decision to carefully consider the documents as on the face of the matter, these appear to be an elaborate scam committed on 2 559 Plaintiffs.
2. The Defendant is a company registered in PNG. The Defendant’s Managing Director, a Peter Ebersohn from the evidence of the Plaintiffs is from South Africa. The Defendant operates an office at Copy Tek Building at Kennedy Road, Gordons, National Capital District.
3. Between January 2018 and August 2019, the Defendant company posted on Facebook it’s business enticing customers to invest in the company by depositing amounts between K300 to K100 000 for a return of 20 percent interest on the principal invested by the end of 6 months.
4. The Plaintiffs being gullible attended at the Defendant’s office and made various deposits to the bank Account of the Defendant company held with Bank South Pacific through EFTPOS payments. The Plaintiffs allege that Peter Ebersohn told the Plaintiffs to provide their details and bank accounts through which the Defendant will pay their returns at the end of 6 months and the Defendant received those transactions and recorded the Plaintiff details and bank account information.
5. The total amount that the Plaintiff’s paid to the Defendant’s company is in the sum of K11 957 414.36. After 6 months of maturity of the Plaintiff’s investment, no payment was made or ever received by the Plaintiffs. The Plaintiff then came to know that the Defendant’s office at Copy Tek Building at Gordons was shut down. Peter Ebersohn subsequently left for South Africa, his country of origin. The Plaintiffs then realised that this could be a scam and reported the matter to the police with the Fraud Squad Office at Konedobu in Port Moresby.
6. From the Affidavit filed by Nickson Samblap who is the lead Plaintiff, I find that the Defendant company ran its’ business on Facebook. Some of the enticing posts on Facebook are as follows:
“Invest 1 to 6 months and get max interest. Unbelievable deals. ONLY FOR PNG.”
“Friday will be a competition. Come on. “Like” and “Share” with all your family and friends. Stand the chance to win K5 000. Help them to better themselves with this investment opportunity. Let the word spread.”
“Act now. Don’t sleep on this. Every day gone past is a day you miss out on a better life.”
7. Numerous other messages like the above were posted on the Defendant’s Facebook page from April 2018 to August of 2019.
8. On 11 December 2018, the Defendant posted on Facebook:
“New Office opened. Fantastic to be a part of it. Investments will run now smoother, with potential higher payouts. Fantastic.”
9. On 12 May 2019, the Defendant company again posted this on Facebook to its’ audience:
“What a fruitful business trip. Guestfund is going forward with massive speed. People all over are smiling big time.”
10. On 6 July 2019, the Defendant, posted the following on Facebook:
“Good morning from Gubong mine in South Korea. Please note because of the struggle to get funds TT out of PNG, the % rate we paid will drop with 5 % from the end of this month. 25 % over 6 months will pay only 20 %. One month’s investment will pay out 15%. This is only for new investments, investing from 1 August onwards. We borrow funds from our customers then we do investments. We pay out customers high rates when we refund the borrowed funds. Everyone win.”
11. The Defendant’s Facebook page, therefore, alarmed the Plaintiffs as its’ investors that it appears that Peter Ebersohn had left the country and that they have not received any of their investments. On 16 August 2019, Peter Ebersohn posted on the Defendant’s page on Facebook the following:
“Sitting at border post. Lots of problems at Zimbabwe. No transport back to South Africa. Road blocked everywhere. Senseless killings of motorists everywhere. What happened to Zimbabwe. Visa back to PNG still with PNG Immigration. Hope to get it soon. Can’t wait to return back to Port Moresby. I just want to get out of this terrible place. I will update as I go. Greetings to all.”
12. Some of the Plaintiffs then commented on the Defendant’s page hoping to get a response in regard to their investments but the Plaintiff has since lost communication with the Defendant and Peter Ebersohn. The Plaintiffs are claiming a total sum of K11 957 414.36 for the Defendant’s breach of promise or breach of an agreement to pay them their investment and the 20 % return on their investments.
13. The Plaintiffs had initially applied for default judgment for the Defendant’s failure to file a Notice of Intention to Defend and Defence however the Court declined the Default judgment application based on Order 12 Rule 37(b) of the National Court Rules that the matters in the pleadings relate to fraud and therefore the matter was heard for trial on 22 July 2022.
Is the Plaintiff entitled to the judgment sum of K11 957 414.36 as claimed?
14. The Plaintiffs through Mr Akia have served all the documents in these proceedings on the Defendants registered office. The Defendant was also notified about the date for hearing however there was no appearance by the Defendant.
15. From the evidence of the lead Plaintiff, there is no agreement and or any document evidencing the terms of the agreement between the Defendant and each of the Plaintiffs who say that they have invested funds with the Defendant however what is evident is that these Plaintiffs were lured by the Defendant and they had given sums of money to the Defendant to invest for a return only to be left hanging dry.
16. Mr Akia has referred to the case of Naki v AGC (Pacific) Ltd[1] where the Court said:
Test to Apply
To work out whether there is agreement between the parties the conventional test to apply is:
• Has one party made an offer, clear and precise in its terms, which has been accepted by the other party?
The test is an objective one:
• Would a reasonable person, having been fully informed as to the actions of the parties, conclude that the plaintiff and the defendant had reached agreement on their arrangement?
Putting it as Frost CJ did in Seafreight Pty Ltd v Bishop Shipping Services Pty Ltd [1976] PNGLR 22:
• Have the parties to the negotiations given their final consent to terms by which they were content to be bound as a complete and exhaustive statement of their rights and liabilities?
If the answer to all the above questions is yes, then the Court should give effect to the outward appearance of agreement and not
be concerned with whether one of the parties might have some unexpressed qualification or reservation about what has been agreed
on. (See generally Chitty on Contracts, supra, at pp 89-163.)
17. I am satisfied that there is an offer made by the Defendant in express terms on the Defendant’s Facebook page. The Plaintiffs have therefore accepted the offer and handed over considerations in various sums for a promise that their returns will be paid back with 20 per cent interest. There exists a contract therefore between the Defendant and the Plaintiffs. I find that there is a breach of the contract when the Defendant failed to meet its’ end of the agreement by not paying the Plaintiffs with their principal amount invested and the promised 20 % interest.
18. It should be noted that the fact that the Plaintiffs were scammed or fooled was after the fact. At the time the Plaintiffs entered into these agreements, they genuinely believed that the Defendant was running a legitimate business even though it sounded too good to be true however this realisation hit the Plaintiffs when Peter Ebersohn started posting on Facebook that he was stuck overseas and is having problems getting back to PNG.
Is the Defendant company a sham?
19. In the case of Bennet v Wuagima Yakari Investments Ltd[2], I discussed the notion of separate legal personalities of companies and shareholders. The foundation case of Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22 sets down the principle that shareholders and directors who may be the controlling mind of companies have distinct separate legal personalities from the company itself.
20. Section 16 of the Companies Act cements this position in Statute that a company exists as a legal person distinct from its’ shareholders. In the case of State v Wyborn[3], the Court considered the issue of separate legal personality where an accused was facing criminal charges as a director of a company. The Supreme Court in Niugini Building Supplies Ltd v National Housing Estate Ltd[4] also considered the issue of separate legal personality of companies or corporations in State Owned Entities.
21. The more relevant case is the case of Odata Ltd v Ambusa Copra Oil Mill Ltd [5] in which the Court considered the issue of lifting the corporate veil in appropriate circumstances to hold the shareholders or the persons behind the company responsible in instances where the company is involved in fraud or for an improper purpose. A company as a distinct legal person can pay fines for and suffer punishment for civil wrongs be it for regulatory breaches etc however where the controlling minds of the company being its’ shareholders and directors have engaged in fraudulent or improper conduct, the corporate veil can be lifted to hold those behind the veil culpable. The Court said this in the Odata[6] case:
“The corporate veil may be lifted in a number of circumstances including when it is fair to do so in all of the circumstances and having regard to the extent of the control of the affairs of the company by whoever is behind it.
In the present case, NPF formed Ambusa as its subsidiary and had control of the board and the activities of Ambusa including entering into of negotiations, finalising negotiations and signing the contract with Odata and eventually terminating it. NPF even assumed the carriage and conduct of the defence of Ambusa. These factors point to Ambusa being only a front and or agent of NPF and in the circumstances it is only fair that the corporate veil should be lifted to allow NPF to face Odata’s claim.”
22. I am of the view that the Defendant Guest Fund Limited is only a façade or a front for Peter Ebersohn to elaborately scheme and manipulate his way into getting his hands on the funds of the unsuspecting Plaintiffs who appear to me to be gullible. After the funds were paid to the Defendant, Peter Ebersohn fled the country. The messages on the Defendant’s Facebook page were clearly enticing and were outright misrepresentations. None of the Plaintiffs had any idea to verify whether this business was approved to receive money and invest in it for a profit etc.
23. I find that the Defendant company is clearly a sham set up by Peter Ebersohn to fraudulently steal people’s money.
24. From the evidence of the Plaintiffs, they are from various parts of PNG in which Peter Ebersohn travelled to and deceived people into giving the Defendant their money. Scams like this have taken place all over the world using the internet and unfortunately, these scammers have travelled to PNG to carry out their fraudulent schemes. I am minded to make orders that the corporate veil shall be lifted for the company Guest Fund Limited and Peter Ebersohn to be held liable together for the debt owing to the Plaintiffs. Peter Ebersohn shall also be criminally charged for fraud and be so dealt with by the police and relevant law enforcement agencies.
25. The Court, therefore, makes the following orders:
Orders accordingly.
________________________________________________________________
Akia & Associate Lawyers: Lawyers for the Plaintiffs
[1] [2005] PGNC 163; N2782 (4 February 2005)
[2] [2022] PGNC 60; N9451 (4 March 2022)
[4] [2020] PGSC 90; SC1985 (31 July 2020)
[5] [2001] PGNC 110; N2106 (6 July 2001)
[6] Ibid
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